Russian President Vladimir Putin and Chinese Vice Premier Zhang Gaoli have launched the construction of the first part of Gazprom’s Power of Siberia pipeline - which will deliver 4 trillion cubic meters of gas to China over 30 years.

“The new gas branch will significantly strengthen the
economic cooperation with countries in the Asia-Pacific region
and above all - our key partner China,” Putin said
at the ceremony outside
the city of Yakutsk - the capital of Russia's Republic of Yakutia
on Monday.

Both President Putin and Vice Premier Zhang Gaoli signed the
freshly-welded pipeline in a time-honored Russian tradition. The
'Power of Siberia' was welded together by workers from Chayanda
gas field, overseen by CEO Aleksey Miller.

"Gazprom is always a reliable supplier of gas to its
customers - which also applies to the ‘Power of Siberia,"
Miller said.

The 3,968 km pipeline linking gas fields in eastern Siberia to
China will be the world's largest fuel network in the world. Both
Putin and Vice Premier Zhang Gaoli have called the project the
world’s largest construction project, as investment from both
countries will be more than $70 billion.

Starting in 2019, Power of Siberia will pump
gas from Siberia to China’s populous northeast region as well as
to Russia’s Far East. The Chinese side will start the
construction of its part of the pipeline in the first half of
2015, the Vice Premier of China said.

Last year, China consumed about 170 billion cubic meters of
natural gas and expects to consume 420 billion cubic meters per
year by 2020. Europe still remains Russia’s largest energy
market, buying more than 160 billion meters of Russian natural
gas in 2013.

“Once we create a gas pipeline network here in the Far East
and Siberia, we will be able to connect European pipeline system
to the East. And this, in terms of export opportunities and
expanding Russia’s ‘gasification’, is very beneficial. Depending
on the situation in world markets, we can more effectively
implement gas flows- either more to the West or to the
East,” Putin told students at North-Eastern Federal
University earlier on Monday.

Running from the Chayanda gas field in the Republic of Yakutia,
the cost of construction is estimated at more than $20 billion
(770 billion rubles), which includes other investment in the
region of $7.5 billion (283 billion rubles). Russia’s largest
steel pipeline manufacturer, TMK, will provide materials for the
project.

The gas pipeline will become a common transit center for gas
production centers in the Yakutia and Irkutsk regions.

The first stage of the project will be to transport gas from the
Chayanda deposit in Yakutia and connect to the town of
Blagoveshchensk on the Chinese border. The 968 km pipeline should
be completed by 2018.

The Chayanda field, which will begin production in 2015, is
estimated to have reserves of 1.2 trillion cubic meters in gas
and 93 million tons of liquid hydrocarbons. Each year the field
is expected to produce up to 25 billion cubic meters of gas and
at least 1.5 million tons of oil.

Putin also said that China can become a shareholder in the Vankor
oil and gas fields in the Krasnoyarsk region in Eastern Siberia.
China will enter into a strategic relationship with Rosneft,
Russia's largest oil company, which owns the field.

The area is estimated to hold reserves of 520 million metric tons
of oil and 95 billion cubic meters of natural gas. It has been in
operation since 2009 and last year produced 21.4 million tons of
oil and oil condensate.

“We generally take a very careful approach to the approval of
our foreign partners, but of course, for our Chinese friends
there are no restrictions,” Putin said.